Why do some payers pay more than others?

I was asked to explain to a patient who had recently paid for a cosmetic procedure, why her health plan had to pay considerably more for a comparable non-cosmetic procedure.  Great question!   

I started by explaining that all healthcare providers charge everyone the same amount.  However, different payers pay different amounts.  It depends on the rate negotiated between the provider and the health plan.  Medicare and some of the biggest health plans such as the Blue pay the least to healthcare providers because they have so many members.  It is somewhat similar to volume discounting - the more you buy the bigger the discount.  In terms of healthcare, the more members a health plan has to channel to providers the bigger the discount.  In her case, she was insured by a smaller plan and therefore, the claim wasn't discounted that much for the non-cosmetic procedures.

Cosmetic procedures are generally discounted the most.  Patients pay cash and often are required to pay the full amount prior to their date of service.  It is much easier and cost effective for providers to deal with these patients.  Also, hospitals and surgical facilities typically have some vacant time in their schedule and if they can fill it with cosmetic procedures it is better for the provider to make a little money than none at all. 

She still wasn't satisfied with my explanation so I tried an analogy.  I used the airline industry.  If you book a flight 3 months in advance you pay a fraction of the amount paid by the person who books the day of the flight.  The airline rewards you with a discount for booking in advance because it gives them more control over their business.  

Rachel and I thought it was a great example, but the patient still complained to the doctor.  The bottom line is that she simply didn't want to pay her bill.  Patients are having to pay more and therefore, are asking more questions.  My advice - make sure the person counseling patients feels comfortable talking to patients about money, they are knowledgeable about benefits and are firm, but compassionate in their approach.